Class 5 Cash & Receivables.pdf

11 Pages

Financial Accounting
Course Code
Daga Sandra

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MGAC01 Intermediate Accounting I S Daga TOPIC CASHRECEIVABLES TEXT Chapter 7 exclude Appendix CLASS QsE72 E719 P72 P713 Case IC71LEARNING GOALS 1 Cashknow how to PRESENT cash on financial statements2 Receivablesunderstand RECOGNITIONMEASUREMENT issues3 Receivablesknow how to record their sale and derecognitionCLASS OUTLINE LEARNING GOAL 1 Cashknow how to PRESENT cash on financial statements Cash is a financial assetA financial asset is cash or a contractual right to receive cash or another financial asset from another party a contractual right to exchange financial instruments with another party under conditions that are potentially favourable or an equity instrument of another entityCICA HandbookReporting Cashsome PRESENTATION issues include how to report the following 1 Restricted Cash 2 Cash in Foreign Currencies 3 Bank Overdrafts 4 Cash Equivalentsdo class exercise E72 1LEARNING GOAL 2Receivablesunderstand RECOGNITIONMEASUREMENT issuesReceivablesThese are claims that a company has against customers and others They can be current or noncurrent trade or nontrade eg advances to employees Types A Accounts ReceivableRecognition and Measurement issues include accounting for 1Sales discountsgrossnet methods 2 Impairment issuesneed to account for bad debts 2 methodsAllowance procedure and a mix of procedures using percentageofsales methodsee Illustration 1do Problem 72B Notes ReceivableThe interest element is ignored for shortterm notes and therefore they are carried at face valueHowever longterm notes are recorded at the present value of the cash expected to be collected For zero interest or unreasonable interestbearing notes an appropriate rate of interest must be determined in order to compute the present value of the notesee Illustration 2 2
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